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Investor concerns over a number of issues, such as Greece, China, Fed policy and the economic and earnings backdrop, remain high. In our July Market Update, Bob Doll, Nuveen Asset Management Senior Portfolio Manager and Chief Equity Strategist, discusses why equity prices should be able to overcome these issues and where investors can find opportunities.
Weekly Investment Commentary from Bob Doll
Large Cap Equity Series Managed by Bob Doll
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00:05:15
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Bob Doll: What to Expect in Equities for the Rest of the Year
Tamara Seaver: Hi, I’m Tamara Seaver from Nuveen investments. Joining me now is Bob Doll, Senior Portfolio Manager and Chief Equity Strategist at Nuveen Asset Management. Thanks for joining me Bob.
Bob Doll: Thank you Tami.
Tamara Seaver: So far in July we've seen equity market volatility pickup so I'd like to get your take on some of the contributors. Let's start with Greece where it seems they have found a fix at least temporarily. What's next for Greece?
Bob Doll: I like the word temporarily that’s exactly what it is. We found some band aids and the question is can we find the adhesive to make the band aids stick. I think the answer is yes, but it's not a foregone conclusion. Greece will continue to have residual impact on volatility. I think it'll go away for a while, but then we'll have Greece four some point down the line, this being Greece three.
Tamara Seaver: Should this be a concern for you U.S. investors looking forward?
Bob Doll: I think it's yet another one of those geopolitical issues that just got to have at least on a back burner. I think the worse of Greece is behind us and markets really didn’t get affected all that much in direction. There was some intra-volatility and I think that's appropriate.
Tamara Seaver: Another area that’s been a concern for some investors is the economic slowdown in China. Do you see any contagion risk there?
Bob Doll: Yes. That’s a bigger concern to me than Greece. I think China given its size has to be monitored. China is clearly slowing I think maybe more than many people think. The question is this has become financially stressed then we have a problem absent that, look, it just makes growth a little bit slower. More exports to Greece take place from Europe and Germany in particular less so as the United States.
Tamara Seaver: Domestically now Fed, policy has been a driver of market volatility. I know I ask you about this every time we talk, but it can't be ignored. When do you think the Fed will act and when they do how will that affect equities?
Bob Doll: Yes, the sooner the better. I can’t wait to get the first one behind us so we don’t talk about it so much as you point out. Look, the consensus is probably September I am in that camp. All the tea leaves i.e. employment, inflation and economic growth all tell us that probably it's time to get started and I think the Fed would like to get the first one behind us precisely for the reason you said we all just keep talking about it.
Tamara Seaver: You mentioned the economic growth and with these issues that we've been talking about kind of a in the front of investors mind some of these fundamentals maybe haven't been giving enough attention. What's your take on second quarter economic growth and also earnings?
Bob Doll: So far so good. I didn’t say so great. I said so good and that’s exactly what it is. What do I mean by that? Economic growths seem to be picking up noticeably from the first quarter, but still not kind of everything in gear. We are growing two and a half maybe if we're lucky 3% real which in my view for equities long term is great. I don’t want strong growth because that invites tightness, Fed increases and inflation so this Goldilocks economy, as people calls it, not too hot and not too cold, is about perfect. Earnings have similarly coming in reasonably good if every company disappoints they’re two that have outperformed expectations and that ratio is just fine.
Tamara Seaver: Putting this all together, I'd like to get your broad opinion on the equity market. What do you say to investors who are sitting on cash and should they put that to work in U.S. stocks?
Bob Doll: So, you've heard me say it before Tami, I'm a dollar cost average never able to call the short term no one really can with consistency if the money is earmark for stocks if we're going to say get started. You don’t have to put it all in, the beauty about investing is a not black or white its lots of shades of grey. My view is the US equity market is in okay shape. It will be better than okay if we can get some improvement in economic growth from the consumer and earnings and I think there's a good shot at that.
Tamara Seaver: Against this back drop, how are you positioning the Large Cap Equity Series which you manage?
Bob Doll: Not a whole lot of change from where we've been, Tami. Free cash flows absolutely key companies that have unit growth and absent pricing power sort of environment. It makes sense. I guess the nuance would be instead of being totally away from companies that get a lot of earnings outside the US we're moderating that somewhat. Market breadth has narrowed and getting a little tougher out there so stocks elections becoming more and more critical.
Tamara Seaver: Any final thoughts you would like to add today?
Bob Doll: I think that we are in environment that’s concerning to a lot of investors. We've been there for a while. We keep climbing the wall of worry. The climb is at a slower pace and I think that’s okay and investors should get used to that.
Tamara Seaver: Thank you very much for your time today.
Bob Doll: Thank you, Tami.
Tamara Seaver: That was Bob Doll from Nuveen Asset Management. For more from Bob or information on the Large Cap Equity Series, please visit nuveen.com. You can also follow Bob on Twitter @BobDollNuveen. Thank you.
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Risks and Other Important Considerations:
The statements contained herein represent the views and opinions of Nuveen Asset Management, LLC as of the date of production/writing and may change without notice at any time based on market and/or other conditions and may not come to pass. This material is for informational and educational purposes only and is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The information provided does not take into account the specific objectives, financial situation, or particular needs of any specific person. All investments carry a certain degree of risk, including possible loss of principal, and there is no assurance that an investment will provide positive performance over any period of time.
Prices of equity securities may decline significantly over short or extended periods of time. Debt or fixed income securities are subject to market risk, credit risk, and interest rate risk, call risk, tax risk, political and economic risk and income risk. Interest rate risk, as interest rates rise, bond prices fall. Non-U.S. investments involve risks such as currency fluctuation, political and economic instability, lack of liquidity and differing legal and accounting standards. These risks are magnified in emerging markets.
Video was filmed on July 23, 2015
Featured Speaker: Bob Doll, CFA, Senior Portfolio Manager and Chief Equity Strategist, Nuveen Asset Management, LLC
Nuveen Asset Management, LLC is a registered investment adviser and affiliate of Nuveen Investments, Inc.
9427-INV-O-07/16
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